As real estate investment in Japan by foreign nationals increases, property management companies are increasingly managing properties owned by foreign owners. Since this requires different procedures and approaches compared to those for Japanese owners, we will outline the key practical points.
Appointment and Registration of a Tax Representative
When a foreign owner who is a non-resident owns real estate in Japan, it is necessary to appoint a tax representative. The tax representative acts on behalf of the owner to fulfill their tax obligations, such as filing tax returns and paying taxes.
Responsibilities of the Management Company
- Advise the Owner on Appointing a Tax Representative
- Confirm submission of the “Tax Representative Notification Form” to the tax office where the property is located
- Explain to the owner that documents from the tax office will be sent to the tax representative after the notification is filed
While the management company itself may act as the tax representative, this entails responsibility for tax filings; therefore, a decision must be made only after establishing a system for collaboration with a certified public tax accountant.
Ex Post Notification Under the Foreign Exchange and Foreign Trade Act
When a non-resident acquires real estate, a notification must be filed with the Bank of Japan within 20 days of the transaction date in accordance with the Foreign Exchange and Foreign Trade Act (Foreign Exchange Act).
Cases where notification is not required
- Acquisition for residential use by the individual or a relative
- Acquisition for use as the individual’s office
- Acquisition from another non-resident
However, vacation homes and second homes do not qualify as “residential use” and therefore require notification. Investment properties are generally subject to notification. As a management company, it is important to inform owners of the need to file a notification at an early stage.
Registration of a Domestic Contact (April 2024–)
Starting in April 2024, it has become mandatory to register a domestic contact address if the registered owner of the property does not have an address in Japan.
Cases Where the Management Company Acts as the Domestic Contact
It is possible that a management company will be registered as the domestic contact. In such cases, a letter of consent and a certificate of registered seal are required. We recommend clearly defining the role of the management company as the domestic contact within the management agreement with the owner.
Even if there is no domestic contact, registration stating “no contact information available” is required, so action must be taken in any case.
Handling of Management Fees and Repair Reserve Funds
For condominiums, management fees and repair reserve funds must be paid monthly. Non-resident owners must take the following steps:
- Confirmation of automatic debit setup from a Japanese bank account
- Acting on your behalf to express your intentions at the homeowners’ association general meeting (through a power of attorney)
- Receiving and forwarding various notifications
Since communication with owners residing overseas is often email-based and subject to time zone differences, sharing information via a management system is highly effective. Visualizing the history of interactions through a ticket-based system allows owners to check the status at any time, which helps build trust.
Practical aspects of rent remittance
If a foreign owner resides overseas, the method of rent remittance must be agreed upon in advance.
- Transfer to a domestic account: The simplest method. If the owner holds a Japanese bank account, this can be handled via a standard domestic bank transfer.
- Remittance to an overseas account: This incurs high fees and takes several days to process. If the end-of-month balance exceeds the equivalent of 100 million yen, a separate report is required.
It is important to clearly stipulate the remittance method, who bears the fees, and the remittance date in the property management contract.
Points to Note When Dealing with Tenants
Just because the property is owned by a foreigner does not mean tenant support will differ significantly. However, you should be aware of the following points:
- There may be a time lag in approving repairs (agree in advance on delegating authority for emergency responses)
- Confirm communication methods with the owner (email, chat tools, etc.)
- Agree in advance on the criteria for determining when to restore the property to its original condition or perform major repairs
Frequently Asked Questions (FAQ)
Q. Does the lease agreement with a foreign owner need to be drafted in a foreign language?
Legally, a Japanese contract is acceptable, but it is advisable to provide a translation of key points or a reference copy of the translated version to ensure understanding. If foreign-language documents are used for registration, a Japanese translation must be attached.
Q. How is the payment of property tax handled?
If a tax representative has been appointed, the tax notice will be sent to that representative. Even if the management company is not the tax representative, providing information on payment deadlines and reminders to the owner is beneficial from the perspective of management quality.
